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LARGE CAP VALUE
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Alliance Disciplined
Value Fund
Semi-Annual Report
May 31, 2000
[GRAPHIC OMITTED]
AllianceCapital [LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
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<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
July 20, 2000
Dear Shareholder:
We are pleased to provide the first shareholder letter for the Alliance
Disciplined Value Fund (the "Fund") for the semi-annual reporting period ended
May 31, 2000.
Investment Objective and Policies
Alliance Disciplined Value Fund invests primarily in the equity securities of
U.S. companies that Alliance believes are undervalued. The Fund's investment
objective is long-term growth of capital through the application of a
disciplined value-oriented investment process.
The Fund expects, under normal circumstances, to invest primarily in equity
securities of about 75 U.S. companies. The Fund may also invest up to 15% of
its total assets in non-U.S. companies.
Investment Results
The following table provides performance data for the Fund and its benchmark,
as represented by the Russell 1000 Value Index, for the five-month period ended
May 31, 2000. (The Fund's inception date for all share classes is December 22,
1999.)
INVESTMENT RESULTS*
Period Ended May 31, 2000
-----------------
Total Returns
-----------------
Since Inception**
-------------------------------
Alliance
Disciplined
Value Fund
Class A 14.90%
-------------------------------
Class B 14.60%
-------------------------------
Class C 14.40%
-------------------------------
Russell 1000
Value Index 0.35%
-------------------------------
* The Fund's investment results are total returns for the periods shown and
are based on the net asset value of each class of shares as of May 31,
2000. All fees and expenses related to the operation of the Fund have
been deducted, but no adjustment has been made for sales charges that may
apply when shares are purchased or redeemed. Returns for the Fund include
the reinvestment of any distributions paid during the period. Past
performance is no guarantee of future results.
The unmanaged Russell 1000 Value Index contains those securities in the
Russell 1000 Stock Index with a less-than-average growth orientation. The
unmanaged Russell 1000 Stock Index is comprised of 1000 of the largest
capitalized companies that are traded in the United States. An investor
cannot invest directly in an index and its results are not indicative of
the performance for any specific investment including Alliance
Disciplined Value Fund.
** Inception date for all classes of shares is 12/22/99.
Additional investment results appear on pages 4 - 5.
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ALLIANCE DISCIPLINED VALUE FUND o 1
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
The Fund outperformed its unmanaged benchmark, the Russell 1000 Value Index
during the period from its December 22, 1999 inception through May 31, 2000.
The Fund's strong performance can be attributed to good stock selection across
an eclectic mix of industries, all qualified by our proprietary investment
process.
Our fundamentally driven process seeks to identify investment candidates with
good business prospects, selling at reasonable valuations. The rigorous
application of our disciplines has led us to overweight the consumer staples
area, where investments in beverages and supermarkets contributed significantly
to outsized performance gains versus the benchmark. Also, good stock selection
within the financial and technology sectors of the market, which exist in the
portfolio at benchmark weights, added meaningfully to Fund performance.
In all cases, our portfolio holdings have been fundamentally researched by
Alliance's intensive research effort, and screened through the Disciplined
Value group's quantitative valuation methodology. We believe that by overlaying
a quantitative valuation framework on top of our analysts' fundamental company
estimates, the Disciplined Value group can systematically compare individual
stock price attractiveness across Alliance's entire universe of research
coverage. It is the valuation insight generated by our quantitative review, in
conjunction with the fundamental expectations and convictions of our research
team, that catalyzes investment activity within the Fund. We expect the
application of our investment process to result in portfolios that
characteristically sell at valuation relationships comparable to our benchmark
while possessing growth potential well in excess of the benchmark. Buying a lot
of growth at discounted valuations is the modus operandi of this Fund.
Investment Discussion and Outlook
Discussions among academics and investment professionals about capital markets
typically center on returns and the tangible moving parts believed to drive
security pricing, e.g., interest rates, inflation, monetary policy, and
corporate profits. As always, the current environment is replete with intense
debate as to the direction of each of these factors. However, when all is said
and done, the only issue that seems to matter to many in today's market is
whether or not a company is a "new economy" facilitator or beneficiary.
Companies connected to the Internet, both figuratively and literally, have
attracted extreme investor interest. By contrast, those not so connected, it is
believed "haven't gotten it" and, are being valued by investors as future
casualties of the new Internet economy.
The impact of this debate on individual security pricing and on the major
capital market indices has been profound. No matter how measured, the
investment performance and valuation differences between companies believed to
be in the vanguard of the "new economy" and companies perceived to be behind
the curve, is unprecedented. In some cases, "new economy" companies with no
product revenues are valued at $20 billion while old economy companies with $1
billion in earnings are valued at $5 billion. In this kind of
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2 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
market, where traditional approaches to common stock valuation have at times
been dismissed, our valuation sensitive approach can appear to some to be
woefully antiquated. However, we continue to remain convinced that company
fundamentals and interest rates do matter and that the laws of financial
economics haven't been repealed. Indeed, our strong performance in the face of
market preference for more dynamic merchandise is ample evidence that investors
can succeed in the current environment by pursuing more disciplined strategies.
Thank you for your interest and investment in Alliance Disciplined Value Fund.
We look forward to reporting to you on market activity and the Fund's
investment results in the future.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Paul C. Rissman
Paul C. Rissman
Senior Vice President
/s/ Frank V. Caruso
Frank V. Caruso
Senior Vice President
[PHOTO John D.
OMITTED] Carifa
[PHOTO Paul C.
OMITTED] Rissman
[PHOTO Frank V.
OMITTED] Caruso
Portfolio Manager, Paul C.
Rissman and Frank V. Caruso
have over 25 years of combined
investment experience.
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ALLIANCE DISCIPLINED VALUE FUND o 3
<PAGE>
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PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
May 31, 2000 (unaudited)
INCEPTION DATE PORTFOLIO STATISTICS
(Class A Shares) Assets ($mil): $5.0
12/22/99
SECTOR BREAKDOWN
24.27% Finance
18.00% Consumer Services
10.50% Consumer Staples
9.18% Basic Industry
9.12% Technology
7.33% Multi-Industry Companies [PIE CHART OMITTED]
6.52% Energy
4.20% Health Care
3.30% Capital Goods
2.49% Consumer Manufacturing
1.84% Utilities
3.25% Short-Term
HOLDING TYPE
96.75% Equity [PIE CHART OMITTED]
3.25% Short-Term
All data as of May 31, 2000. The Fund's sector breakdown and holding types may
vary over time. These breakdowns are expressed as a percentage of total
investments.
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4 o ALLIANCE DISCIPLINED VALUE FUND
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INVESTMENT RESULTS
------------------
INVESTMENT RESULTS
NAV AND SEC CUMULATIVE TOTAL RETURNS
AS OF MAY 31, 2000*
Class A Shares
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Without Sales Charge With Sales Charge
Since Inception* 14.90% 10.06%
Class B Shares
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Without Sales Charge With Sales Charge
Since Inception* 14.60% 10.60%
Class C Shares
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Without Sales Charge With Sales Charge
Since Inception* 14.40% 13.40%
SEC CUMULATIVE TOTAL RETURNS
AS OF THE MOST RECENT QUARTER-END (MARCH 31, 2000)
Class A Class B Class C
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Since Inception* 4.88% 5.40% 8.20%
The Fund's investment results represent cumulative total returns. The NAV and
SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception date for all share classes: 12/22/99.
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ALLIANCE DISCIPLINED VALUE FUND o 5
<PAGE>
--------------------
TEN LARGEST HOLDINGS
--------------------
TEN LARGEST HOLDINGS
May 31, 2000 (unaudited)
Percent of
Company Value Net Assets
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Kroger Co. $ 248,437 4.9%
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Comcast Corp. Cl.A 236,718 4.7
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Tyco International, Ltd. 200,016 4.0
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Household International, Inc. 199,750 4.0
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Gannett Co., Inc. 194,250 3.9
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Chase Manhattan Corp. 194,187 3.9
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First Data Corp. 190,612 3.8
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Associates First Capital Corp. Cl.A 185,203 3.7
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A.H. Belo Corp. 184,719 3.6
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Computer Associates International, Inc. 180,250 3.6
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$2,014,142 40.1%
MAJOR PORTFOLIO CHANGES
Period Ended May 31, 2000 (unaudited)
----------------------------------
Shares
----------------------------------
Purchases Bought Holdings 5/31/00
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A.H. Belo Corp. 11,500 11,500
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Chase Manhattan Corp. 2,600 2,600
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Comcast Corp. Cl.A 6,250 6,250
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Computer Associates International, Inc. 3,500 3,500
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First Data Corp. 3,400 3,400
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Gannett Co., Inc. 3,000 3,000
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Household International, Inc. 4,250 4,250
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Kroger Co. 12,500 12,500
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Solutia, Inc. 12,750 12,750
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United Technologies Corp. 2,750 2,750
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6 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
May 31, 2000 (unaudited)
Company Shares U.S. $ Value
--------------------------------------------------------------------------
Common Stocks - 97.0%
Finance - 24.3%
Banking - Money Center - 5.6%
Chase Manhattan Corp. ...................... 2,600 $ 194,187
KeyCorp..................................... 4,250 89,250
------------
283,437
------------
Banking - Regional - 6.7%
Bank of America Corp. ...................... 2,750 152,797
Bank One Corp. ............................. 2,750 90,922
U.S. Bancorp............................. 3,500 91,000
------------
334,719
------------
Insurance - 3.7%
ACE, Ltd. .................................. 2,750 73,734
Allstate Corp. ............................. 3,000 79,500
PMI Group, Inc. ............................ 650 32,988
------------
186,222
------------
Miscellaneous - 8.3%
Associates First Capital Corp. Cl.A......... 6,750 185,203
Household International, Inc. .............. 4,250 199,750
MGIC Investment Corp. ...................... 700 34,694
------------
419,647
------------
1,224,025
------------
Consumer Services - 18.1%
Airlines - 2.6%
Delta Air Lines, Inc. ...................... 1,250 64,297
UAL Corp. .................................. 1,250 64,375
------------
128,672
------------
Broadcasting & Cable - 8.4%
A.H. Belo Corp. ............................ 11,500 184,719
Comcast Corp. CI.A.......................... 6,250 236,718
------------
421,437
------------
Printing & Publishing - 3.9%
Gannett Co., Inc. .......................... 3,000 194,250
------------
Toys - 3.2%
Hasbro, Inc. ............................... 5,000 81,875
Mattel, Inc. ............................... 6,000 81,375
------------
163,250
------------
907,609
------------
Consumer Staples - 10.5%
Beverages - 1.6%
The Pepsi Bottling Group, Inc. ............. 3,000 78,375
------------
Household Products - 0.5%
Viad Corp. ................................. 1,000 26,313
------------
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ALLIANCE DISCIPLINED VALUE FUND o 7
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Company Shares U.S. $ Value
--------------------------------------------------------------------------
Retail - Food & Drug - 4.9%
Kroger Co.(a)............................... 12,500 $ 248,437
------------
Tobacco - 3.5%
Philip Morris Companies, Inc. .............. 6,750 176,344
------------
529,469
------------
Basic Industry - 9.2%
Chemicals - 6.5%
Dow Chemical Co. ........................... 750 80,297
Eastman Chemical Co. ....................... 500 22,781
Lyondell Chemical Co. ...................... 4,000 66,750
Solutia, Inc. .............................. 12,750 154,594
------------
324,422
------------
Mining & Metals - 1.4%
Alcoa, Inc. ................................ 1,250 73,047
------------
Paper & Forest Products - 1.3%
Georgia-Pacific Group....................... 2,000 65,500
------------
462,969
------------
Technology - 9.2%
Computer Services - 3.8%
First Data Corp. ........................... 3,400 190,612
------------
Computer Software - 3.6%
Computer Associates International, Inc. .... 3,500 180,250
------------
Contract Manufacturing - 1.8%
Sanmina Corp.(a)............................ 1,400 89,075
------------
459,937
------------
Multi-Industry Companies - 7.4%
Honeywell International, Inc. .............. 1,250 68,359
Tyco International, Ltd. ................... 4,250 200,016
U.S. Industries, Inc. ...................... 7,500 101,250
------------
369,625
------------
Energy - 6.5%
Domestic Integrated - 3.5%
Kerr-McGee Corp. ........................... 1,500 89,531
USX-Marathon Group.......................... 3,250 88,360
------------
177,891
------------
International - 3.0%
BP Amoco Plc (ADR) (United Kingdom)......... 1,230 66,881
Repsol, SA (ADR) (Spain).................... 4,000 84,250
------------
151,131
------------
329,022
------------
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8 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Shares or
Principal
Amount
Company (000) U.S. $ Value
--------------------------------------------------------------------------
Health Care - 4.2%
Medical Products - 0.7%
St. Jude Medical, Inc.(a) .................. 1,000 $ 35,938
------------
Medical Services - 3.5%
IMS Health, Inc. ........................... 2,500 41,250
Tenet Healthcare Corp. ..................... 5,250 134,531
------------
175,781
------------
211,719
------------
Capital Goods - 3.3%
Miscellaneous - 3.3%
United Technologies Corp. .................. 2,750 166,203
------------
Consumer Manufacturing - 2.5%
Auto & Related - 1.2%
Delphi Automotive Systems Corp. ............ 3,400 61,413
------------
Building & Related - 1.3%
Masco Corp. ................................ 3,250 63,984
------------
125,397
------------
Utilities - 1.8%
Telephone Utility - 1.8%
Global TeleSystems Group, Inc.(a)........... 5,000 55,625
SBC Communications, Inc. ................... 850 37,134
------------
92,759
------------
Total Common Stocks
(cost $4,462,467)........................ 4,878,734
------------
Short-Term Investment - 3.3%
Time Deposit - 3.3%
State Street Euro Dollar
6.00%, 6/01/00
(amortized cost $164,000)................ $164 164,000
------------
Total Investments - 100.3%
(cost $4,626,467)........................ 5,042,734
Other assets less liabilities - (0.3%)...... (15,693)
------------
Net Assets - 100%........................... $ 5,027,041
============
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
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ALLIANCE DISCIPLINED VALUE FUND o 9
<PAGE>
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
May 31, 2000 (unaudited)
Assets
Investments in securities, at value (cost $4,626,467) ........ $ 5,042,734
Cash ......................................................... 172
Receivable for capital stock sold ............................ 146,641
Receivable from Adviser ...................................... 23,661
Dividends and interest receivable ............................ 8,773
Prepaid expenses .......................................... 82,844
-----------
Total assets ................................................. 5,304,825
-----------
Liabilities
Distribution fee payable ..................................... 2,312
Accrued expenses and other liabilities ....................... 275,472
-----------
Total liabilities ............................................ 277,784
-----------
Net Assets ................................................... $ 5,027,041
===========
Composition of Net Assets
Capital stock, at par ........................................ $ 438
Additional paid-in capital ................................... 4,513,549
Net investment loss .......................................... (9,428)
Accumulated net realized gain on investments ................. 106,215
Net unrealized appreciation of investments ................... 416,267
-----------
$ 5,027,041
===========
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price per share
($2,877,363 / 250,532 shares of capital stock
issued and outstanding) ................................... $11.49
Sales charge--4.25% of public offering price ................. .51
------
Maximum offering price ....................................... $12.00
======
Class B Shares
Net asset value and offering price per share
($632,115 / 55,145 shares of capital stock
issued and outstanding) ................................... $11.46
======
Class C Shares
Net asset value and offering price per share
($1,517,563 / 132,669 shares of capital stock
issued and outstanding) ................................... $11.44
======
See notes to financial statements.
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10 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
December 22, 1999(a) to May 31, 2000 (unaudited)
Investment Income
Dividends (net of foreign taxes
withheld of $41)..................... $ 27,875
Interest................................ 4,545 $ 32,420
-------------
Expenses
Advisory fee............................ 11,377
Distribution fee - Class A.............. 2,868
Distribution fee - Class B.............. 852
Distribution fee - Class C.............. 4,756
Amortization of offering expenses....... 73,000
Administrative fee...................... 51,000
Audit and legal......................... 33,184
Transfer agency......................... 27,250
Custodian............................... 25,561
Printing................................ 15,938
Directors' fees......................... 12,000
Registration............................ 1,810
Miscellaneous........................... 1,906
-------------
Total expenses.......................... 261,502
Less: expenses waived and reimbursed
by the adviser (see Note B).......... (219,654)
-------------
Net expenses............................ 41,848
-------------
Net investment loss..................... (9,428)
-------------
Realized and Unrealized Gain
on Investments
Net realized gain on investment
transactions......................... 106,215
Net unrealized appreciation of
investments 416,267
-------------
Net gain on investments................. 522,482
-------------
Net Increase in Net Assets
from Operations...................... $ 513,054
=============
(a) Commencement of operations.
See notes to financial statements
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ALLIANCE DISCIPLINED VALUE FUND o 11
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES
IN NET ASSETS
December 22,
1999(a) to
May 31, 2000
(unaudited)
------------
Increase (Decrease) in Net Assets
from Operations
Net investment loss ........................................ $ (9,428)
Net realized gain on investment transactions ............... 106,215
Net unrealized appreciation of investments ................. 416,267
-----------
Net increase in net assets from operations ................. 513,054
Capital Stock Transactions
Net increase ............................................... 4,413,787
-----------
Total increase ............................................. 4,926,841
Net Assets
Beginning of period ........................................ 100,200
-----------
End of period .............................................. $ 5,027,041
===========
(a) Commencement of operations.
See notes to financial statements.
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12 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
May 31, 2000 (unaudited)
NOTE A
Significant Accounting Policies
Alliance Disciplined Value Fund, Inc. (the "Fund"), organized as a Maryland
corporation on July 6, 1999, is registered under the Investment Company Act of
1940 as a diversified, open-end management investment company. The Fund offers
Class A, Class B and Class C shares. Prior to commencement of operations on
December 22, 1999 the Fund had no operations other than the sale to Alliance
Capital Management L.P. (the "Adviser") of 10,000 shares of Class A shares and
10 shares each of Class B and Class C for the aggregate amount of $100,000 on
Class A shares and $100 on each of Class B and Class C shares on December 14,
1999. Class A shares are sold with a front-end sales charge of up to 4.25% for
purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or
more, Class A shares redeemed within one year of purchase may be subject to a
contingent deferred sales charge of 1%. Class B shares are currently sold with
a contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are subject to a contingent deferred sales charge of
1% on redemptions made within the first year after purchase. All three classes
of shares have identical voting, dividend, liquidation and other rights, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The financial statements have
been prepared in conformity with accounting principles generally accepted in
the United States, which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange, on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) or on The
Nasdaq Stock Market, Inc. are generally valued at the last reported sales price
or if no sale occurred, at the mean of the closing bid and asked prices on that
day. Readily marketable securities traded in the over-the-counter market,
securities listed on a foreign securities exchange whose operations are similar
to the U.S. over-the-counter market, and securities listed on a national
securities exchange whose primary market is believed to be over-the-counter
(but excluding securities traded on The Nasdaq Stock Market, Inc.), are valued
at the mean of the current bid and asked prices. U.S. government and fixed
income securities which mature in 60 days or less are valued at amortized cost,
unless this method does not represent fair value. Securities for which current
market quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors.
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ALLIANCE DISCIPLINED VALUE FUND o 13
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
meanof the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, currency gains and
losses realized between the trade and settlement dates on security transactions
and the difference between the amounts of dividends and interest recorded on
the Fund's books and the U.S. dollar equivalent amounts actually received or
paid. The Fund does not isolate the effect of fluctuations in foreign currency
exchange rates when determining the gain or loss upon the sale of equity
securities. Net currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates would be
reflected as a component of net unrealized appreciation (depreciation) of
investments, and foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. Organization and Offering Expenses
Organization expenses of $37,000 were charged to the Fund as incurred prior to
commencement of operations and reimbursed by the Adviser. Offering expenses of
$155,725 have been deferred and are being amortized on a straight-line basis
over a one year period.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date the securities are
purchased or sold. The Fund accretes discount and amortizes premiums as
adjustments to interest income. Investment gains and losses are determined on
the identified cost basis.
6. Income and Expenses
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares.
7. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
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14 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with accounting principles generally accepted in the United States. To the
extent these differences are permanent, such amounts are reclassified within
the capital accounts based on their federal tax basis treatment; temporary
differences, do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") at an annualized rate of .75% of the
average daily value of the Fund's net assets. The fee is accrued daily and paid
monthly.
The Fund and the Adviser have entered into an Expense Limitation Agreement (the
"Agreement"), dated December 6, 1999, under which the Adviser has agreed to
waive its fees and, if necessary, reimburse expenses for the period from
December 22, 1999 (commencement of operations) to December 21, 2000, exceeding
the annual rate of 2.50% of average daily net assets for Class A shares and
3.20% of average daily net assets for Class B shares and Class C shares,
respectively. Under the Agreement, any waivers or reimbursements made by the
Adviser during this period are subject to repayment by the Fund in subsequent
periods, but no later than December 21, 2002, provided that repayment does not
result in the Fund's aggregate expenses in those subsequent periods exceeding
the foregoing expense limitations. Further, the aggregate repayment to the
Adviser will not exceed the sum of the Fund's organization costs and initial
offering expenses. During the period ended May 31, 2000, the total amount of
expenses waived and reimbursed by the Adviser subject to repayment amounted to
$205,654.
Pursuant to the Advisory agreement, the Adviser provides certain legal and
accounting services for the Fund. For the period ended May 31, 2000, the
Adviser agreed to waive its fees. Such waiver amounted to $51,000.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $18,139 for the period ended May 31, 2000.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
has advised the Fund that it has received front-end sales charges of $287 from
the sale of Class A shares and $1,934 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class C shares for the period ended
May 31, 2000.
Brokerage commissions paid on investment transactions for the period ended May
31, 2000, amounted to $22,933, none of which was paid to brokers utilizing the
services of the
-------------------------------------------------------------------------------
ALLIANCE DISCIPLINED VALUE FUND o 15
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp. ("DLJ"), an
affiliate of the Adviser, nor to DLJ directly.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30% of the average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. The fees are accrued daily and paid monthly. The
Agreement provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. The
Distributor has advised the Fund that it has incurred expenses in excess of the
distribution costs reimbursed by the Fund in the amount of $31,100 and $178,568
for Class B and Class C shares, respectively; such costs may be recovered from
the Fund in future periods so long as the Agreement is in effect. In accordance
with the Agreement, there is no provision for recovery of unreimbursed
distribution costs incurred by the Distributor beyond the current fiscal year
for Class A shares. The Agreement also provides that the Adviser may use its
own resources to finance the distribution of the Fund's shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $8,629,714 and $4,273,462,
respectively, for the period ended May 31, 2000. There were no purchases and
sales of U.S. government and government agency obligations for the period ended
May 31, 2000.
At May 31, 2000 the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes. Gross
unrealized appreciation of investments was $560,983 and gross unrealized
depreciation of investments was $144,716 resulting in net unrealized
appreciation of $416,267.
NOTE E
Capital Stock
There are 9,000,000,000 shares of $0.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each Class consists
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16 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
of 3,000,000,000 authorized shares. Transactions in capital stock were as
follows:
------------ ------------
Shares Amount
------------ ------------
December 22, December 22,
1999(a) to 1999(a) to
May 31, 2000 May 31, 2000
(unaudited) (unaudited)
---------------------------------
Class A
Shares sold 241,508 $ 2,472,737
--------------------------------------------------------------------------------
Shares redeemed (976) (10,390)
--------------------------------------------------------------------------------
Net increase 240,532 $ 2,462,347
================================================================================
Class B
Shares sold 57,849 $ 622,378
--------------------------------------------------------------------------------
Shares redeemed (2,714) (24,773)
--------------------------------------------------------------------------------
Net increase 55,135 $ 597,605
================================================================================
Class C
Shares sold 133,729 $ 1,365,800
--------------------------------------------------------------------------------
Shares redeemed (1,070) (11,965)
--------------------------------------------------------------------------------
Net increase 132,659 $ 1,353,835
================================================================================
NOTE F
Bank Borrowing
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the period ended May 31, 2000.
(a) Commencement of operations.
-------------------------------------------------------------------------------
ALLIANCE DISCIPLINED VALUE FUND o 17
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
<TABLE>
<CAPTION>
------------ ------------ ------------
Class A Class B Class C
------------ ------------ ------------
December 22, December 22, December 22,
1999(a) to 1999(a) to 1999(a) to
May 31, 2000 May 31, 2000 May 31, 2000
(unaudited) (unaudited) (unaudited)
-------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .......... $10.00 $10.00 $10.00
-------------------------------------------------
Income From Investment Operations
Net investment loss(b) ........................ (.02) (.05) (.06)
Net realized and unrealized gain on investment
transactions ................................ 1.51 1.51 1.50
-------------------------------------------------
Net increase in net asset value from operations 1.49 1.46 1.44
-------------------------------------------------
Net asset value, end of period ................ $11.49 $11.46 $11.44
=================================================
Total Return
Total investment return based on net asset
value(c) .................................... 14.90% 14.60% 14.40%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) ..... $2,877 $ 632 $1,518
Ratios to average net assets of:
Expenses, net of waivers/reimbursements(d) .. 2.50% 3.20% 3.20%
Expenses, before waivers/reimbursements(d) .. 19.62% 13.45% 14.91%
Net investment loss(d) ...................... (.33)% (1.09)% (1.12)%
Portfolio turnover rate ....................... 142% 142% 142%
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of
all dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total investment return
calculated for a period of less than one year is not annualized.
(d) Annualized.
-------------------------------------------------------------------------------
18 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
benchmark
A standard by which a fund's performance can be measured. A benchmark is
usually an unmanaged index, such as the Standard & Poor's 500 Stock Index or
the Lehman Brothers Aggregate Bond Index.
capitalization or market capitalization
The absolute dollar value of a company's outstanding stock. Capitalization is
determined by multiplying the amount of publicly owned shares by the stock's
current market value.
equity
Another term for stock.
net asset value (NAV)
The value of a mutual fund's total assets, minus its liabilities, divided by
the number of shares outstanding.
portfolio
The collection of securities that make up a Fund's or an investor's
investments.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market.
An index is often used as a benchmark for a mutual fund. An investor cannot
invest directly in an index.
-------------------------------------------------------------------------------
ALLIANCE DISCIPLINED VALUE FUND o 19
<PAGE>
----------------
ALLIANCE CAPITAL
----------------
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with over $394
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 28 of the FORTUNE 100 companies and public retirement funds in 33
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 276
investment professionals in 22 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional investors.
All information on Alliance Capital is as of 3/31/00.
-------------------------------------------------------------------------------
20 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
--------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
--------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
At Alliance Capital, shareholder satisfaction is among our top priorities.
That's why we provide our shareholders with a wide variety of products and
time-saving services to meet their needs.
o Low Minimum Investments
You can begin investing in Alliance Capital funds with as little as $250
(except for Alliance Select Investor Series Premier Portfolio and
Alliance Select Investor Series Technology Portfolio, which generally
have a $10,000 minimum initial investment) and may make subsequent
investments of $50 or more.
o Automatic Reinvestment
You may choose to reinvest fund dividend and capital-gains distributions
automatically at no charge.
o Automatic Investment Program
Build your investment account by having money automatically transferred
from your bank account on a regular basis.
o Dividend Direction Plans
You may cross-invest dividends from one fund into the same class of
Shares in any other fund without incurring a sales charge. This can be a
good way to diversify your assets.
o The Alliance Advance
A quarterly newsletter discussing investment strategies, economic news
And other matters that could affect your mutual fund investment.
o Auto Exchange
You may choose to automatically exchange money from one Alliance Capital
fund to another on a regular basis. This can be a good way to dollar cost
average*, helping you to invest with discipline.
o Systematic Withdrawals
Regular checks for specified amounts can be sent to you or to your
brokerage or bank account.
o A Choice of Purchase Plans
Most funds are available in A, B, and C Class shares. Many funds are also
available in Advisor Class shares.
o Telephone Transaction
Purchases, transfers and redemptions can be made by calling (800)
221-5672. Our knowledgeable representatives are available to assist you
Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time.
o Alliance Answer: 24-Hour Information
For your convenience, our computerized audio response system is available
to you 24-hours a day by calling (800) 251-0539. Using any touch tone
phone, you can hear share prices, get account balances, review details of
your last transaction, obtain dividend information, order
statements/checkbooks, review fund objectives, literature and Watchlist
information, order additional copies of statements and request additional
year-end tax forms (available from February 1 to May 31).
o Alliance Capital on the World Wide Web at www.alliancecapital.com. Here,
you can access updated account information, make additional investments,
request more information, exchange between Alliance funds and view fund
performance, press releases and articles.
Dollar cost averaging does not assure a profit nor protect against loss
In a declining market. Since this strategy involves continuous
investments in securities, regardless of fluctuating prices, investors
should consider their financial ability to invest during periods of low
price levels.
-------------------------------------------------------------------------------
ALLIANCE DISCIPLINED VALUE FUND o 21
<PAGE>
------------------
BOARD OF DIRECTORS
------------------
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
William H. Foulk, Jr.(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Frank V. Caruso, Senior Vice President
Paul C. Rissman, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Thomas J. Bardong, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Custodian
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Principal Underwriter
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
Transfer Agent
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036-2798
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
-------------------------------------------------------------------------------
22 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance F0und
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Limited Maturity Government Fund
Mortgage Securities Income Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
-------------------------------------------------------------------------------
ALLIANCE DISCIPLINED VALUE FUND o 23
<PAGE>
NOTES
-------------------------------------------------------------------------------
24 o ALLIANCE DISCIPLINED VALUE FUND
<PAGE>
Alliance Disciplined Value Fund ---------------
1345 Avenue of the Americas BULK RATE
New York, NY 10105 U.S. POSTAGE
(800) 221-5672 PAID
New York, NY
Permit No. 7131
---------------
AllianceCapital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used under
license from the owner, Alliance Capital
Management L.P.
DVPSR500
